Subsidy removal and agroecosystem health

Abstract

Changes in government policy, such as the current reform of agricultural subsidies in Canada and elsewhere, are known to influence the condition of agricultural systems. Adopting an agroecosystem health framework, whereby change in subsidization is interpreted as a stress on an agroecosystem which may alter system health, this paper assesses potential environmental implications arising from the removal of economic subsidies in commercial agriculture by (1) documenting the current state of, and trends in, the economic subsidization of OECD and Canadian agriculture; (2) conceptualizing the problem of subsidy removal within an agricultural systems model; (3) empirically illustrating the short term impacts of subsidy removal in the case of New Zealand pastoral agriculture post-1984. Existing theory suggests two possible outcomes resulting from subsidy and regulatory reform. A reduction in input or output subsidies, such as those provided to fertilizer applications or upland pasture production, may result in a reduction in the use of inputs and the production of outputs, thereby reducing the intensity of production and hence improving agroecosystem (environmental) health. Conversely, the transfer of risk from the collective to the individual coupled with an increased reliance upon the market and its reduced marginal returns, may shorten planning horizons of individual farmers, resulting in more exploitative use of the environment, and hence deteriorated agroecosystem (environmental) health. Based on observed resource use changes in New Zealand pastoral agriculture, where large scale subsidy and regulatory reform was undertaken in the post-1984 period, the short term response to subsidy removal indicates a decrease in farming intensity brought upon by reduced input use and production levels, thereby potentially improving agroecosystem (environmental) health. In contrast, the longer term resource use behaviour, while not yet clear, may indicate the reverse